Wednesday, May 30, 2012

Instead of issuing checks to students, colleges have for years been making deals with banks to hand out aid through debit cards. Then the banks tack on all sorts of fees:

$50 for "lack of documentation" -- whatever that means, since the college is the one getting information from the student

$50 if an account is overdrawn for 45 days

$10 a month if the account isn't used for six months

$29 to $38 for overdrawing the account through an automatic payment

50 cents to use a PIN rather than a signature during a retail transaction

Plus replacement card fees and fees for using the card at any but a small number of ATMs on campus

A single company, Higher One, does business with one-fifth of the students in the country. US Bank and Wells Fargo, between them, have almost the same share.

As Barbara Ehrenreich points out in Preying on the Poor, from her new website the Economic Hardship Reporting Project, "Individually the poor are not too tempting to thieves... [but] the poor in aggregate provide a juicy target for anyone depraved enough to make a business of stealing from them."

That's it in a nutshell, according to Rich Williams, author of a report by US PIRG on the problem: "For decades, student aid was distributed without fees. Now bank middlemen are making out like bandits using campus cards to siphon off millions of student aid dollars."

The AP story goes on to say:

Students can opt out of the programs and choose direct deposit or paper checks to receive their college aid, but relatively few do. The cards and accounts are marketed aggressively using college letterhead and websites carrying the endorsement of colleges. Higher One also warns students that it will take extra days if they choose direct deposit or a paper check....

Offerings by financial companies vary by campus. Some issue checking accounts with debit cards. Others offer prepaid debit cards, which are similar to bank debit cards but can carry higher fees and offer fewer consumer protections.

Often, students' campus ID cards double as payment cards. At the University of Minnesota, TCF Bank issues cards that serve as school IDs, ATM and debit cards, library cards, security cards, health care cards, phone cards, and stored-value cards for vending machines, the report said. TCF also has branches on campus and 25-year naming rights to the football stadium. Its cards charge similar fees, the report says....

Under its contract with Huntington Bank, Ohio State University will receive $25 million over 15 years, plus a sweetener of $100 million in loans and investments for the neighborhoods around campus, the report said. Florida State receives a portion of every ATM fee paid by a student, it says.

It's difficult to get a full picture of how much money the schools are getting because most of them refuse to release their contracts with banks. Only a handful were available to the authors of the report.

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Third of four daughters, raised in a rural area outside of a small town. Now living in a moderately large city, making media and immersed in other people's media. Finally cleaning out the filing cabinet and loading its contents to the cloud.